(3,35 EUR, -2,07%) will report its 3Q11 earnings on 10 November, before market. We expect underlying earnings before tax to drop 21.3% to € 372m (consensus at € 339m) mainly as a result of the transfer of the US reinsurance business ($ 79m uPBT in FY10) and the US BOLI/COLI business ($ 50m uPBT in FY10) to run-off but also the 8.6% y/y decline in average USD/EUR. Positive run-off results and slightly lower impairment charges are most likely to be more than offset by less realised gains and negative fair value items. This should lead to a 75% drop in net profit to € 162m (consensus € 78m).
3Q11 EARNINGS – MAIN ITEMS
New life sales (APE) are estimated at € 414m (-21.2%) which should be the combined effect of business put into-run off, the de-emphasizing of production of fixed annuities to the benefit of variable annuities and the decline in USD/EUR. Since variable annuities contribute less to NBV, we expect the (all modelled) NBV to drop by 18.8% to € 97m with a NB-margin at 17.8% (-0.7 points). Gross deposits, excluding run-off businesses are estimated at € 5.3bn.
Most of the fair value items should see a negative impact from the decline in interest rates and fromthe credit derivatives partly offset by the positive earnings contribution from the US macro hedge. We see a negativecontribution of € 125m partly offset by realised gains at € 40m.
Core equity is expected to rise 10.4% q/q to € 18.6bn (€ 9.88 per share) driven by the positive impact from reported earnings (€ 162m), the rise in the fair value reserve (interest rates came down strongly) aswell as € 987m from positive currency translation gains (USD strengthened q/q).
Aegon’s exposure to PIIGS countries is very limited at € 867m o/w € 745m on Spain, € 4m on Greece and € 85m on Italy. We do not expect any impairments.